8 Things To Know About OTS Holdings Limited Before You Invest
August 16, 2021
OTS Holdings Limited (“OTS Holdings”) (SGX:OTS) made its debut on the Catalist board of the Singapore Stock Exchange on 17 June 2021. With a market capitalization of around S$66.40 million, OTS Holdings is one the largest meat products manufacturing companies in Singapore. If you are looking at OTS Holdings with interest, here are 8 things to know before you invest.
1. Company profile
Established in 1993, OTS Holdings is a brand builder and food manufacturing group in the consumer industry with a strong niche in ready-to-eat and ready-to-cook meat products with key markets in Singapore and Malaysia. Its vision is to develop a growing portfolio of established consumer brands and to become and innovative market leader in the region. The Group owns and operates 3 modern food manufacturing facilities, 2 in Singapore and 1 in Butan Island, Indonesia.
OTS Holdings’ portfolio of brands include Golden Bridge, Kelly’s, Golden Lion and Orchid. It has also targeted the growing halal food market through retail brand El-Dina and food service brand Kiziq through its subsidiary, Ellaziq Singapore, a halal food specialist. The Group also produces seasonal food products (such as roast meats, hams and pork knuckles) during festive periods such as Chinese New Year and Christmas. At present, OTS Holdings has more than 1,100 stock keeping units (“SKUs”) across 13 main products types under its 6 house brands, targeting both halal and non-halal consumer segments.
(Source: IPO prospectus)
2. Distribution channels
OTS Holdings’ revenue comprises the following:
Sales generated from major supermarkets (“Modern Trade”);
Sales generated from convenience stores, provision shops and wholesalers (“General Trade”);
Sales generated from hotels, restaurants, hawker centers, food courts, food and beverage stores, and caterers (“Food Services”); and
Sales that are mainly generated from e-commerce platforms and the export markets, and other income such as vehicle rental income and miscellaneous income (“Others”).
The breakdown of the Group’s revenue by business segment and geographical segments are set out in the tables below:
(Source: IPO prospectus)
OTS Holdings’ largest customers include both NTUC Group and Sheng Siong (SGX:OV8), which contributed a combined 26.4% to the Group’s FY2020 revenue. Revenue from NTUC Group as a percentage of OTS Holdings’ total revenue fell from 27.6% in FY2018 to 23.6% in FY2019, and from 18.5% in FY2020 to 10.3% in HY2021, mainly due to a change in product mix by the Group to focus on higher margin products.
(Source: IPO prospectus)
3. Future plans
The Group’s business strategies and future plans are as follows:
Actively develop and manage its brand and product portfolio;
Expand its business overseas through the continued replication of its successful business model;
Improvement and/ or expansion of production efficiency and capacities; and
Expansion of its business through acquisitions, joint ventures or strategic alliances.
Notably, the Group is currently in the process of developing its own plant-based food products, such as plant-based canned luncheon meat, to cater to a growing demand for plant-based food products. The Group intends to launch its new plant-based food products by early 2022.
In addition, the Group will continue to market different brands to target different consumer price points and expand its presence in its existing markets. For instance, the Group intends to strengthen its presence on e-commerce platforms and via its websites.
The Group has an established business presence in Malaysia and it intends to focus on increasing and expanding its product offering to the Malaysian market.
To further expand its business overseas, the Group has established and commenced operations in Indonesia in the first half of 2020 through its associated company, PT Delta Bridge Foods (“Delta Bridge Indonesia”), which is currently manufacturing non-halal Chinese sausages for distribution in Indonesia. The Group intends to expand the product range offered by Delta Bridge Indonesia to include canned meat products by early 2022.
Further, the Group has incorporated a subsidiary in the Philippines on 5 April 2021, and expects to import its food products into the Philippines for sale via subsidiary by early 2022.
4. Use of proceeds
The estimated net proceeds of approximately S$6.56 million raised from the IPO will be used as follows:
S$2.00 million to be used for improvement and/or expansion of production efficiency and capacities, including the acquisition of new machineries and equipment;
S$2.50 million to be used for expansion of Group’s overseas operations, including the initial investment and set up costs in Philippines;
S$0.50 million to be used for developing new products and engaging in research and development; and
Approximately S$1.56 million to be used for general working capital purposes.
5. Dividend policy
The Group currently does not have a fixed dividend policy. The declaration and payment of future dividends may be recommended by the Board at their discretion, after considering several factors, which includes:
The Group’s level of cash and retained earnings.
The ability of its subsidiaries to declare and pay any dividends to the company.
Working capital requirement and general financing conditions.
Despite that, OTS Holdings intends to recommend and distribute dividends of at least 50.0% of the Group’s net profit attributable to shareholders for FY2021 and at least 40.0% for FY2022.
6. Management and substantial shareholders
Subsequent to the listing, OTS Holdings’ two largest shareholders are Mr. Ong Bee Chip and Mr. Ong Bee Song with a joint shareholding stake of 75.1%. Besides being a controlling shareholder of the company, Mr. Ong Bee Song is a sales director of Golden Bridge Foods Manufacturing Pte Ltd and Ellaziq Private Limited (Ellaziq Singapore), with both entities being wholly owned subsidiaries of OTS Holdings.
Mr. Ong Bee Chip, who is the Managing Director of OTS Holdings and controlling shareholder, is responsible for overseeing the Group’s business and strategic planning and overall management of the Group’s facilities and maintenance. He is also responsible for the Group’s overseas operations and executing expansion plans for growth and development.
Separately, Ms. Ong Chew Yong, who is the Group’s Executive Director, is responsible for overseeing the Group’s general operations including human resources, procurement, general management and administration. She plays a part in the overall implementation of information technology initiatives with the Group to improve production and efficiency.
OTS Holdings’ Managing Director, Mr. Ong Bee Chip, its Executive Director, Ms. Ong Chew Yong, and its controlling shareholder, Mr. Ong Bee Song, are siblings.
7. Historical financial performance
(Source: IPO prospectus)
OTS Holdings’ revenue and net profits have grown at a compounded annual growth rate of 20.2% and 57.9% respectively from FY2018 to FY2020. In addition, HY2021 revenue and net profit has jumped by 44.5% and 260.0% when compared to its last year comparative period.
8. Current valuation
With a closing share price of S$0.32 as at 19 July 2021, OTS Holdings’ is trading at a price to earnings (PE) ratio of 11.9. Coupled with the strong financial performance and growth prospects, OTS Holdings appears well positioned for a long runway of growth upon its listing.
An accountant by training, F.I.R.E 2030 is a student of value investing since 2012. She believes that successful investing requires discipline and patience. But with the right knowledge and temperament, ordinary investors can achieve extraordinary results. These articles are her journals on stocks and the investing journey toward financial freedom in 2030.